So what's the difference between the Lego Mindstorms NXT 2.0 kit we all got for xmas and the NXT 1.0 kit? About 170 pieces. The CPU is the same, the sensor selection is slightly different, and there is a different assortment of pieces for building models with older instructions. 1.0 came out a few years ago, 2.0 is new as of August 2009.

This means that many good books that were written with the NXT 1.0 kit in mind (such as "One-Kit Wonders") don't quite work with the 2.0 kit, since they require a different set of pieces. Unfortunately, so far Lego has not offered their own expansion set to make the new set compatible with old model instructions (as they supposedly did once or twice in Mindstorms history). Fortunately, an independent seller of Lego items is selling a NXT 2.0 retrograde kit with the missing 170+ pieces for $80. Bill also offers an upgrade kit for an NXT 1.0 that brings it up to par with the newer version.

Hooray for BrickLink, the fan-maintained database and marketplace for trading Lego pieces and products.

I take it the PC software that comes with NXT 2.0 is radically different, and not available in Bill's retrograde kit (though not exactly necessary). The NXT brick firmware is also a major upgrade, and it's not yet clear whether Lego will offer a free upgrade for older NXT bricks that have the same hardware specs. I can't imagine Lego wants to force loyal fans to buy a new complete kit just for the software, even if they can't justify manufacturing their own retrograde kit. [Update: Not sure why I wrote this paragraph. Lego makes the NXT brick firmware available for free download, and so far I haven't seen statements indicating that NXT 1.0 bricks can't be upgraded for the newer features like sound. I did see folks complaining about software differences, but I'm unclear on their nature and whether up- or down-grading is necessary for practical purposes. Bill makes it a point to mention that his retrograde kit doesn't include the NXT-G v1 CD-ROM, but I'm not sure why you'd need it. Comments welcome.]

NXT 2.0 FAQ [PDF] by active-robots.com has this to say on the difference between 1.0 and 2.0:

The NXT 2.0 set has a bigger and revised element assortment of 619 elements, 16 building and programming challenges for 4 new fun and action-packed robotic models complete with building instructions. The new hardware mix consist of an NXT micro-controller, 3 Interactive Servo Motors - with built-in Rotation Sensors, 1 Ultrasonic Sensor, 2 Touch Sensors and the new Color Sensor with triple functionality; it acts a Color Sensor - detecting different colors, as a Light Sensor - seeing different light intensities and also works as a Color Lamp.